What happens if one of your third party vendors or subcontracts is deemed non-compliant after your team has reviewed the certificate of insurance and corresponding endorsements and coverage information? Should you withhold payment to that individual? How can you expedite the process to gain compliance as soon as possible to get that individual back on the job? We’ll cover those questions and more in this post.
Withholding Payment For Non-Compliance
Vendors and subcontractors will be reluctant to pay more to increase coverage to become compliant if there’s no consequence. That’s why we strongly suggest that your organization withhold payment for those that are deemed non-compliant.
In order to withhold payment from a non-compliant vendor or subcontractor, however, it’s important to ensure that the next steps are in accordance with the signed contract between your organization and the other party. Doing so will ensure you can withhold payment without fear of a costly legal battle.
Chron suggests that it’s a best practice to always write up a contractual agreement that binds your organization and the subcontractor to terms. If your organization or the subcontractor dispute owed payments, it’s up to you to prove the legitimacy of these withholdings in court. Verbal agreements for commercial work are not legally binding in most states. Withholding payments from a subcontractor without a written contract presents your organization with significant liability because you will lose the withholdings and owe additional penalties to the subcontractor.
Therefore, you must include compliance language in a predetermined contractual agreement that both parties agree to. Then, if a third party vendor or subcontractor fails to meet compliance standards, you can withhold payment until he or she is deemed compliant again. Just keep in mind that the language should be very clear in the contractual agreement with no loopholes in order to keep your organization safe from legal issues.
Expediting The Compliance Process
As companies continue to try to reduce costs by trimming coverages, the risk of non-compliant vendors, tenants, subcontractors, and even suppliers continues to grow. Is your staff keeping track of individual contracts that outline specific requirements? If you are collecting certificates just to confirm they were received, you have no guarantee that the requirements are actually being met. This could mean that your company could be non-compliant on one, several, or even all of your policies without even realizing it.
Tracking and managing certificates of insurance to confirm all limits, endorsements, and insurance requirements are in place allows your business to transfer costly claims and other exposures to your vendors. If your company fails to do that and your certificates aren’t trackable or managed correctly, you are risking your bottom line.
Likewise, you need your workers to get back on the job as soon as possible to complete their important jobs. If certificate of insurance tracking is holding up the process, then it could result in your organization getting behind on projects or holding up other work that needs to be completed. If a third party vendor or subcontractor is deemed non-compliant, your organization should strive to work through the issues in order to expedite the process as quickly as possible in order to get them back on the job.
Your Partner For COI Tracking
It can be a lot of pressure for the person in charge of certificates of insurance. Shouldn’t you, as an executive, provide them with support they need to make sure the job gets done right? With the right software, you can not only make sure every certificate gets the attention it needs, you can save your team hours of work while significantly reducing risk to your company in the process.
myCOI is a cloud-based software solution and exists for one reason: to help you handle the task of certificate of insurance management and to protect your company against underinsured claims, costly litigation and failed audits. The software and insurance tracking services are combined into an easy-to-use solution developed and supported by a team of insurance professionals and is built on a foundation of insurance industry logic to automate the certificates of insurance communication process and ensure you remain protected.